Gross margin, markup, GST-inclusive price, the price you need for a target margin, and the real cost of a discount — for NZ retailers, Shopify sellers, tradies and anyone pricing a product or service.
Enter a target margin to see the excl-GST and incl-GST price you'd need.
Gross profit per unit—
Gross margin—
Markup on cost—
Selling price incl GST—
Price for target margin (excl / incl GST)—
Margin after discount—
Extra units needed to break even on the discount—
Gross profit per month—
General information only — not financial, tax or legal advice. Figures are estimates from the inputs you enter. Confirm with your adviser, accountant, lender or insurer.
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Prices exclude GST. Illustrative tools only — not legal, tax or financial advice.
Margin is not markup
Markup is profit as a percentage of cost; margin is profit as a percentage of selling price. A $42 item sold for $79 has an 88% markup but a 47% margin. Suppliers, accountants and Shopify reports talk in margin; a lot of pricing folklore ("double it") talks in markup. Mixing them up is the most common pricing mistake small businesses make.
Why discounts hurt more than they look
A discount comes straight out of gross profit, not revenue. At a 47% margin, a 15% discount cuts profit per unit by nearly a third, so you need about 45% more sales to make the same money. Before you run a sale, use the break-even line above — and remember GST: if you're registered, 15% of the ticket price was never yours, so work in excl-GST numbers.
Assumptions and sources
Margin
(sell − cost) ÷ sell; markup = (sell − cost) ÷ cost; all excl GST when registered.
Target price
cost ÷ (1 − target margin).
Discount break-even
Extra volume needed so that discounted unit profit × new volume = current unit profit × current volume.
GST
15% — ird.govt.nz/gst
Last reviewed 6 September 2026. Rates and thresholds change — check the linked sources before relying on a figure.
Frequently asked questions
How do I calculate a 20% profit margin?
Divide cost by 0.8. A $42 cost ÷ 0.8 = $52.50 selling price excl GST. Adding 20% to cost gives a 20% markup, which is only a 16.7% margin.
What is a reasonable profit margin for a small business in NZ?
It varies by sector: many retailers run 30–50% gross margin, hospitality 60–70% gross on food but thin net margins, trades and services often 20–40% net after wages. Net margin after all overheads is what matters; gross margin is the starting point.
How do you calculate margin?
(Selling price − cost) ÷ selling price × 100, using excl-GST figures if you are GST registered.
Should I include GST in my pricing calculation?
Work everything out excluding GST, then add 15% for the shelf price. GST collected is passed to IRD; counting it as revenue overstates your margin by 15%.
